WHOSE IS THE NATIONAL DEBT?
Hamilton, Walton
Whose Is The National Debt? By WALTON HAMILTON IT SEEMS impolite to discuss the national debt except in terms of fiction. The Wall Street Journal regards it as a vast portfolio of bonds through...
...the result has been to impose on the common people the hard way...
...The point is that the face value of outstanding bonds is without significance...
...We must think things, not speculate with metaphors...
...It is stumped—even as you and I—by an income-tax return...
...Among them, Sen...
...If Congress should critically resume its ancient power of the purse, we could easily reduce national outlay by, say, at least a third, and probably increase our munitions and material considerably...
...A few daring persons, however, have cried out that we cannot have the war without paying for it...
...In essence, then, the function of the war debt is the redistribution of income...
...The cheer-up boys—with Walter Lipp-mann in the solo part—proclaim that God will be in his heaven if we only produce like hell...
...We pay out monies to our munition-makers...
...The alas, alas boys— witness the McGraw-Hill ads—lament that an unspecified but mightily important something is going to destruction...
...They are no longer there to pay their way...
...we fight as we go...
...The commune of bond holders is small, compact, powerful, skilled in the arts of "tax avoidance...
...But statecraft can meet every situation with a ready formula...
...That is, if we lock up Mr...
...We must bring the collection and the disbursement of revenue into accord with the downright actuality that we shoot as we go...
...4It isn't the Government which pays, you under...
...it is Congress which must raise the revenue...
...It is this difference which makes easy, bearable, or utterly intolerable the civic debt which is fastened on the industrial system...
...And to demand that Congress do the dirty work of "soaking the poor," when it has no part in the spending, is a little too much for human nature...
...The state of public opinion is not ready for it" . . . "bonds appeal to interests whose love of country must be bought" . . . "politics and psychology converge sharply to limit what measures are possible...
...And when the depression comes, they will move thick and fast from those who are less to those who are more secure...
...The first is a streamlining of our revenue system...
...The ? lower income group, with larger wages or higher prices for farm products, has been able to buy war bonds...
...The arsenal of taxation holds many ingenious devices...
...The tax avoidance boys have thus far had by far the better of it...
...As the government's bonds become a monument to a historical event, an institution of civil debt is established which goes capitalism at least one better...
...If we are to indulge even vagrant thoughts about so solid a sum as a multiple of a billion dollars, we must start in the world of here and now, not in the never-never land of our oracles...
...7Intent and result are two different things...
...It cannot isolate interest on the war debt from other items in the Government's bill...
...it cannot, from its assembly lines and out of its stock-piles, hand us airplanes, machine guns, tanks...
...We fight the good fight for human freedom— and vest certain persons with equities in other persons' pocket books...
...The bother is that the likeness of the State to a person just will not do...
...it is bewildered by the intricacy of the taxation system...
...As the cost is shifted from bonds to taxes, the total of expenses is substantially reduced...
...If in all the lines the patterns coincide, the debt exists in name only...
...If fault is to be found with them, it is in asking for too little rather than for too much...
...And the run-of-mine writer, in looking at it, turns the government which borrows into a person and then muddles that person's identity...
...they are there ready to serve those skilled in their use...
...In wartime the Government has a right to at least four bits of real stuff for every dollar it lays down...
...But it is not the Government's debt...
...The State Turns Bill-Collector The war has set millions of persons to work and for the time at least has made them better off...
...Do not get impatient, events will move fast enough...
...In editorial, column, cartoon, you can any day witness this feat of endurance...
...The Wall Street Journal regards it as a vast portfolio of bonds through which any one who will may buy a share in the war...
...It is an incentive to extravagance to allow all expenditures to be made by officials who never have to ask where the cash is coming from...
...You, the other fellow, and I have been willing and able to buy war bonds...
...You may object that the subject is technical and on it he is an amateur...
...But what any one of us has laid out in bonds—and perhaps a lot more —he could have borne as taxes...
...If it is good enough for taxes, it is surely good enough for bonds...
...it collects from its citizens who are tax-payers...
...Shifts in personal fortune will, of course, occur...
...The shooting is over, the real costs belong to the past...
...Federal taxes for other purposes will cut heavily into what might otherwise go into savings...
...Then each of us will pay in taxes just enough to meet the charges on the bonds he owns...
...The fact which signifies is that monies are collected from some of us and handed over to others of us...
...Banks, insurance companies, investment trusts will enlarge their holdings of the State's paper...
...Under such an arrangement the net loss would be only the expense of collection and disbursement...
...The war debt consists of obligations of person to person...
...The sales tax, the most iniquitous device of all, falls squarely upon the standard of life and reaches even to persons quite unable to pay...
...And to keep up an interest charge on the national debt is likewise confiscation...
...A Compact Commune But, in the real world, a great institution of civic debt will emerge...
...It pays out to its citizens who are bond-holders...
...But the future is hardly in our debt for what we take away from it...
...The dollar will, of course, never be the same again...
...Superimpose the pattern of benefit on that of burden and not the result...
...it does not have-to be told that the more it pays in taxes, the less the yield on the bonds it holds...
...But we can chance at least a glance ahead...
...Bigbig, who insists upon selling his government short...
...ISN'T it then high time to face the facts of life...
...By the more or less by which they fail to match, the sum which must be paid is defined as heavy, moderate, or light...
...Let's assume the principle of ability-to-pay to which we all pay lip service...
...2If we thought things, and not symbols, we would ? make our national finance reflect the facts of life...
...what can we do to help you...
...So, if there is no escape from confiscation, why not do it right and get it over...
...But if we allow him to plan—or shall I say plot—"the reconversion of industry," we are in for serious trouble...
...A facing-up to reality makes two great demands...
...Divorced alike from the precious metals and from merchandise, it will rest squarely upon the national credit...
...The mass of people who can be made taxpayers ia large, scattered, inarticulate, little versed in the dubious ways of internal revenue...
...For the favored concerns will set down a cost against their capital value, and in addition we shall continue to pay interest on the bonds which represent the initial outlay...
...It is not a nice, noble, tangible figure which stands for real estate, buildings, equipment, good-will, all of which in active production is grinding out an "earned increment" to keep the investment alive...
...The very clumsiness of the tax system opens wide the door...
...If the Government can confiscate the services of millions of men, surely it can confiscate the monies and materials essential to their protection as they...
...As for its worth abroad, it will have as many values as the circumstances of various countries", fix for it...
...For the Government lays out, not its own monies, but those of its citizens...
...The arguments against mobilizing the tax system into the war effort are well known...
...The bulk we borrow by selling bonds to our people, natural and corporate...
...How great the weight is, and to whom, depends upon how Uncle Sam throws the burden about...
...For to compel citizens to turn to other citizens a share of their incomes doesn't look so good...
...it is paper, backed by the State's credit which is its power to tax...
...Society will include a mass of people who have not assumed but have been conscripted—and presently will be born—into a system of debt...
...Or else we will turn them over for a song and as a sacrifice to a no longer free enterprise...
...I repeat...
...1ln the world of reality, not that of the frills of ? finance, we pay for our own war...
...But for citizens dutifully to pay their taxe3 and for the government to live up to its sacred obligations is as it should be...
...The cry of heavy taxes will be loud i» the land...
...If we demand that this new capacity-to-produce be put to work, it will—like any other investment—pay its own way...
...The New Yorker views it as a gigantic sponge with which to soak up excess purchasing power and thus to avoid inflation...
...Civil debt, on the contrary, stands for no factories, systems of transport, apparatus of production...
...all that the nation is out is the expense of collection...
...It is imperative that we do not allow them to become victims of a demobilization allowed to run its own course...
...The second great demand is that the divorce between the power to tax and the power to spend be ended...
...And, since it cost nobody nothing, it wouldn't matter to how many trillion billion the war debt ran...
...And it doesn't come out of production...
...All of which adds up to this—that we are unwilling to accept the responsibilities which a total war imposes on us...
...If a man's intake were in excess of his taxes, the State would say, "Sorry, old chap, but you'll have to get your taxes up or your holdings down...
...Thus we pledge "the national credit" and thus we incur a "national debt...
...for capital put to work is supposed to pay its own way...
...And irony adds its last touch of paradox...
...6Already the two groups are drifting apart...
...But this is only one of the restless puzzles which the subject holds...
...Thus the State becomes Uncle Sam...
...The war debt represents functionless capital...
...And, as drift gets in its licks, the separation can be helped skillfully along...
...We would conscript wealth as now we conscript men...
...But here I must leave off, for it is well known that taxes is one subject and the public debt another one...
...To PM it is a grand opportunity for propaganda—a way of bringing home to every person the seriousness of the current military crisis...
...The ordinary events of life— accident, sickness, lack of work, a new car, the purchase of a home—will claim them...
...Within the bounds of the United States, it will have—well, whatever value it has...
...So here goes—We Fight As We Go We pay for the war as we go...
...Equipped with an organization, arguments, propaganda, pressures, it is not going to take it lying down...
...All it does is to collect and to pay over...
...The ? intent of Congress has been to take the easy road...
...If all of us have bought war bonds according to our several abilities, then for heaven's sake let all of us pay taxes according to our several abilities...
...For that reason no one can say how large a war debt the State can stand...
...It was reported the other day that 3 per cent of the investment funds of all insurance companies is already in Government bonds...
...and promising ventures into research, education, recreation, housing, health will be stopped by an inspired shudder over where the revenue is coming from...
...It is true that the debtor-creditor relationship is not direct...
...Thus, as the civil debt becomes a dominant institution, the State is catapulted into a new office...
...If a man were on the losing end, it would say, "You have gotten yourself into a pickle...
...On this issue I would like to hear from the common man...
...And if a tax that hurts is "confiscation," so is any tax that can be levied...
...It has in various ways already been insinuated into our legislation...
...In theory, that is, in fairy-land, the interest charge imposes no burden...
...And Congress would have to decide whether the ritual of useless bookkeeping were worth the bother...
...The bonds will doubtless be put to use as collateral in some emerging system of corporate promotion...
...We can in our fighting use no armament, materials, supplies except those we have on hand...
...he passes it along...
...It is convenient ¦—in fact-necessary—to employ the government as a go-betwee'n...
...What exact form this communism-of-the-right will take depends upon far too many trends to be explored here...
...It is not like business debt...
...In a bout at legislation it is clear where the advantage lies...
...The war debt will become a major political issue...
...note how recent measures have multiplied the number of income tax payers—and yet have fallen far short of the revenue mark...
...We court disaster if we fight a total war under a fiscal system which, is obsolete...
...It is the difference between the two patterns which determines the size of the tribute which one group in the nation must continue to pay to another group...
...But, in a game of make-believe, we resort to a rigamarole of debits and credits...
...It is almost impossible even to entertain the question...
...Yet, because an obsolete system is used to fight a total war, we touch off an institution of civil debt which endures...
...at the war's end, we could then close the war's account...
...It will, as the bill collector for its private creditors, take on the job of seeing to it that the people come across...
...Interest is due from Citizen Debtor to Citizen Creditor upon a something which no longer signifies...
...Where that office will carry it, the future must disclose...
...its real costs have long ago been met...
...and Pilgrim, weighted down with an ever heavier load, stumbles on...
...And if all of us have to pay until it hurts, we can be counted upon to see to it that Congress does its duty...
...Bob La Follette has fought stubbornly for a recognition of "ability to pay," and Randolph Paul, and his boys in the Treasury, have insisted upon the principle of pay-as-you-go...
...Uncle Sam doesn't bear the burden...
...A later generation cannot run its capacity-to-pro- duce for our benefit...
...The State—mind the big S—merely acts as middleman...
...Uncle Sam undertakes Pilgrim's Progress...
...But being, an amateur is not going to stop the common man from having to shoulder the debt...
...As peace comes it is going to be increasingly hard to hold them...
...And, as bond-holding is concentrated into fewer hands, watch for an all-out drive...
...If they are mutually exclusive, some persons will have to pay other persons the total amount—and the receipts of the creditors are wholly at the expense of the debtors...
...It is conscious as to where its own interest lies...
...3The war debt is not like the capital account of ? a corporation...
...The war is history...
...From the one to the other—into the coffers of the Treasury and out again—a stream of interest flows, always, hereafter, forevermore, amen, until the heavens fall—or the debt is retired...
...In which case we will lay down a couple of quids for no quo...
...In a war for Four Freedoms it would be a little presumptous to capitalize its benefits as the property of holders of war bonds...
...And we leave to the coming generation a vast legacy of plants, factories, equipment...
...At present, it is broadly the Administration, narrowly the war command, which spends...
...A part—a rather small part—we pick up as taxes...
...Kest assured that all will be done that can be done to drive a wedge between those who will collect and those who must pay...
...and, against all good taste, I have taken a look at the two of them at the same time...
...stand...
...Because of it corporations pay dividends to individuals...
...For plants will be closed down—and we must continue to pay interest on their value without getting anything in return...
...It's a little too much to ask Uncle Sam to take all this without breaking his stride...
...Instead the physical things for , which the war debt stands have* as a soldier would put it, "been shot to hell...
...5The degree of identity between the tax-payer ? and the bondholder is the key to the problem...
...No matter how much we should desire to do so, there is no way in which we can load its cost, in whole or in part, on posterity...
...And, most significant of all, the State will assume a new function...
...Because of it individuals pay dividends to corporations...
...We do draw on the future when we speed up depreciation or'destroy materials which we might later put to use...
...the public debt, like the tail of a comet, streams gloriously behind...
...And, granted that victory is "national security," no accountant has devised a way to convert its fruits into a money magnitude...
...go into battle...
Vol. 8 • June 1944 • No. 23
